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Starting a Contract or Temp Job? 9 Helpful Accounting Tips to Remember


8th May 2017 Facebook Twitter LinkedIn Google+ Career Advice,Writing




Not all jobs are of the straightforward 9 – 5 variety with taxes and national insurance paid direct through PAYE. Some temporary contracts, or in instances where work is undertaken on a freelance or self-employed basis, may require you to invoice for your time, and take care of your own bookkeeping and taxes.

 

It’s also worth noting that employees earning over £100,000 also need to file a tax return.

 

For those in any of these working situations, here are ten useful tips on maintaining your books and keeping your finances straight.

 

 

1) Collect Receipts for all Expenses

 

Even very small amounts paid out can mount up over the year, so save receipts for everything right down to bus fares and other travel expenses. You can keep the paper mountain a little smaller by taking photos or scans of the paper originals and saving them in digital format. HMRC is fully on board with the digital revolution and will accept such records in this format.

 

This doesn’t excuse you from staying organised:

 

  • Save digital records where you can find them again.
  • Name files in the same way so there’s no confusion.
  • Organise files by type, month or client if you work for several different customers.
  • Make regular backups to safeguard against accidental losses.

 

 

2) Save for Taxes

 

Calculate 25% of earnings and put this amount into a separate savings account so there are no nasty surprises when the tax bill rolls round. Also, remember that if your previous year’s tax bill was greater than £1,000, you will need to make a payment on account of 50% towards your tax bill next year. This falls due at the end of July annually. An accountant can help you calculate your likely bill to help with budgeting.

 

 

3) Separate Business Finances from Personal Ones

 

Running business finances from within a personal bank account is never a good idea, and it makes more work at the end of the financial year when putting together your tax return.

 

Whether you do your own books or use professional services, the transactions will have to be separated anyway. Save time and money in the long term by maintaining separate business finances from the start.

 

 

4) Set up a Limited Company

 

While running a limited company involves more administrative responsibility, there are also many benefits, particularly when it comes to income, tax or liability. Generally, if your business generates over £25,000 profit per year, it’s worth considering your options:

 

  • Salary can come partly from dividends which don’t attract NICS, and can represent big tax savings over a standard salary or drawings.
  • Expenses paid through a limited company attract 20% corporation tax relief. Strict rules must be adhered to, which your accountant could advise on.
  • A limited company can represent a more professional standing with some larger corporations.

 

 

5)  Understand What Records to Keep

 

Bookkeeping can be confusing if you’ve never done it. Here’s a rundown of the most important business aspects you need to record:

 

  • Working hours or jobs completed per client.
  • Hourly costs or the cost of each job if it’s a flat rate.
  • All business expenses (keep your receipts).
  • All business payments (don’t forget bank transfers).
  • All monies received.

 

 

6) Get Paid On Time

 

Setting up an invoicing system and routine can help you stay on top of invoices and payments outstanding. Work out your terms and add these to your invoices as reminders to yourself and your client or customer, but be willing to compromise when you’re dealing with companies that have set dates for making payments.

 

  • Send invoices out regularly. You can do this immediately on completion of the job, or at monthly intervals, whichever is most convenient.
  • Set up reminders to yourself and clients as the payment due date approaches.
  • Monitor payments, and chase any late payers. Stay polite but firm.

 

 

7) Hire the Right Professional Help

 

Many people confuse the roles of bookkeepers and accountants. If you’re struggling to maintain your records on a regular basis, you need the help of a bookkeeper. He or she will take all your receipts, invoices, bank statements and everything else and use the information to update your software or spreadsheet. Over the year, this record becomes the information an accountant needs to compile your tax return.

 

Your accountant could also offer higher end business advice, based on the financial knowledge an analysis of your books provides. Properly kept books offer insight into cash flow, expenses, tax forecasts, and can indicate growth potential or a need to cut back in certain areas.

 

 

8) Keep Key Information Safe

 

There are certain items of information you need to keep safe, and have to hand:

 

  • Your UTR. Your Unique Taxpayer Reference is a 10 digit number that you are allocated when you register as self-employed or set up a limited company. It’s needed for your tax return, and is yours for life.
  • National Insurance Number. National insurance numbers are issued to UK citizens automatically around their 16th birthday. You’ll need it when entering employment and when registering a new business and setting up your own national insurance payments, or in any dealings with the Department for Work and Pensions.
  • PAYE Details. If you find yourself in the position of being both employed and self-employed, tax can get confusing. It’s possible to get all your personal allowance allocated to your paid employment, which would mean you’d pay tax on all income earned from self-employment.

 

 

9) Recognise the Value of Good Bookkeeping

 

While some self-employed people find bookkeeping a chore, it can become interesting when you learn how to interpret the reports and statements that good software can generate. You can understand your cash flow, keep track of your expenses, more easily see who owes you money, and get an overall clear picture of the health of your business.

 

It’s worth taking a course if you know nothing about bookkeeping, so you at least understand the basics and can work more closely with a professional if you choose tonotdo your own books.

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